Alex Rodriguez may be most famous for his career as a Yankees baseball phenom and his high-profile relationship with Jennifer Lopez, but he's also a seasoned real estate investor. That's why the news that he's getting into the hotel business warrants a second glance. Our own Liz Brumer recently identified hotels as one of the top opportunities of 2021 because it's likely there will be a lot of distressed assets in the coming months.
Rodgriguez will be an investor in a $650 million hospitality fund being created by CGI Merchant Group. CGI was founded in 2006 and is a private equity firm that invests in commercial real estate and infrastructure opportunities. It has deployed capital in retail, office, and leisure and is based in Miami, where Rodriguez also spends a lot of his time. The fund is a joint venture with Adi Chugh, the founder of Maverick Commercial Properties. Rodriguez and Chugh began to work together earlier this year, building out a commercial real estate portfolio that spans multiple sectors. The hospitality venture, named the H-Fund, will buy and rebrand 20 hotels in North America over the next three years and then re-launch them as Hilton (NYSE: HLT) hotels. It's expected to announce its first acquisitions in early 2021.
The slugger with the golden touch
Through his A-Rod Corporation, Rodriguez invests across a variety of industries, but he appears to have a particular fondness for real estate. A-Rod Corp has acquired over $1 billion in real estate. His properties include apartment buildings in Manhattan, one of which he invested in with Barbara Corcoran of "Shark Tank" fame. One of the company's South Florida investments, a Miami Beach office complex, is a partnership with Starwood Capital Group.
Some of his venture capital investments also have a real estate focus. A-Rod Corp was part of a $47 million funding round for Bungalow, a startup that turns rental houses and apartments into co-living properties. The company participated in a $51 million round for Density, a company that uses depth sensors and deep learning algorithms to measure building occupancy and improve usage.
While A-Rod's latest venture targets hotels, he's also playing the other side of this trend; he has invested in Sonder, a company that offers short-term rentals in 35 cities. Sonder is one of the few short-term rental startups that has continued to expand during the pandemic. It has raised approximately $560 million in funding, and its valuation pushes it into unicorn status.
Lessons from the master
There are a few things to learn from A-Rod's investing, especially when it comes to real estate. He's centered many of his investments in the places he knows best -- New York City and South Florida. Because he owns personal properties in those cities, he's got a sense of what the markets are like.
His high profile also gives him access to people who have more experience than he does, and he is not afraid to learn from them. Some athletes lose money after retirement because they make bad investments. However many of the smartest, such as legendary real estate titan and Dallas Cowboys legend Roger Staubach, and another Cowboys all-star Emmit Smith, have parlayed their professional sports glory days into a robust second career as real estate investors. Rodriguez has taken business classes and met with many famous investors, including Warren Buffet.
He cofounded Monument Capital Management in 2012 and used his star power to help build out four different funds that invested in workforce housing. Like many investors, he has learned that he can maximize his investing power by working with others. The company's first fund opened in 2013, bought 2,700 units of housing, and closed out in 2018, achieving a gross internal rate of return of 40%. All four funds are focused on multifamily investments, mainly in Sunbelt states where the population is growing rapidly.
Rodriguez is also an example of getting started in real estate at a young age; he bought his first property when he was just 22 with his first baseball earnings. He has worked with another investor on Project Destined, a company that teaches real estate investing to young children and shows them that real estate is a way for them to build and secure wealth.
We won't know for several years at least if Rodriguez's bet on hospitality pays off. However, if it doesn't, it's clear he has plenty of other irons in the fire to help sustain his real estate empire.